BANGALORE, Aug 19 (Reuters) - Athletic shoe retailer Foot Locker's (FL.N) second-quarter earnings beat market expectations by a cent, helped by slightly better margins and continuing robust demand for toning footwear.

www.footlocker.com

An improved inventory position helped the company drive higher margin sales, along with selective promotional spending, Chief Executive Ken Hicks said in a statement.

"This supports the case that incoming CEO Ken Hicks, who has been with the company for about a year now is making progress at improving the profitability of the business," Buckingham Research analyst John Zolidis said.

Hicks quit his position as president and chief merchandising officer at J.C. Penney (JCP.N) in September last year to take over as the athletic shoe retailer's chief.

Since then, Foot Locker, which operates about 3,500 retail stores across North America, Europe and Australia, has been shutting down underperforming stores and cutting jobs in a bid to consolidate operations of its various store chains under one management structure.

It reported the second consecutive quarter of positive same-store sales -- a key metric of retail health -- after fifteen consecutive quarters of declines.

Same-store sales were up 2.5 percent during the quarter.

Zolidis said the company got a boost from strong sales at the popular toning footwear, technical running and apparel categories.

However, Morningstar analyst Paul Swinand said the consumer spending was still under pressure, and the company would continue relying on toning footwear to drive demand.

Foot Locker, which along with smaller rival Finish Line Inc (FINL.O), has been hurt by a weak mall environment as shoppers cut back spending on athletic shoes, but got a boost from the popularity of toning footwear for women.

"Toning is helping everyone in athletics right now and it will go further, but its not going to drive the category forever," Swinand said. The driver for success in the short term would be the company's new programs to drive margins through apparel and private-label products, he added.

For the second quarter ended July 31, the New York-based company reported net income of $6 million, or 4 cents a share. It broke even in the year-ago quarter. Net sales at the company were down slightly at $1.09 billion.

Analysts on average were looking for earnings of 3 cents a share, on revenue of $1.12 billion, according to Thomson Reuters I/B/E/S.

Merchandise inventory slipped 5.1 percent to $1.21 billion in the quarter.

Foot Locker shares, which touched a near two-year high of $16.76 in April, have slipped 7 percent after the company said in May that it would continue to remain cautious till it sees greater evidence of a sustained economic recovery.

Shares of the company were trading flat at $12.99 after-market.

(Reporting by Shradhha Sharma in Bangalore; Editing by Unnikrishnan Nair, Vyas Mohan)